On 3 June 2014 the Department for Business Innovation and Skills (BIS) announced the government’s decision to create a new statutory code of practice to govern the relationship between pub owning companies and their tied tenants and an independent adjudicator to monitor compliance with that code and adjudicate disputes.
The code will provide all tied tenants with:
- Increased transparency;
- fair treatment;
- the right to request an open market rent review (if they have not had one for 5 years); and
- the right to take disputes to the adjudicator.
There is to be an enhanced code creating additional rights and obligations for those tenants of pub companies with 500 or more tied pubs in England.
With an on average 30 to 40 pubs closing per week the government appears to have decided that self-regulation is not working and an new statutory code that will come into force on a date to be agreed is the only way to safe guard the future of the pub industry. The implications of the new code will remain to be assessed following its introduction and no doubt a full consultation with the pub industry.
Paul Westwell, Partner in our Property Department, commented
“We have acted for a number of pub tenants over recent years. A large number of which have run successful and profitable businesses however we continue to encounter situations where tenants are not able to meet their obligations under fixed term leases resulting in defaults and possible pub closures. The creation of the code may go some way towards establishing and formalising rights which a number of the more local breweries and pub owning companies adhere to”.